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New Premiums Reduce Participation in Children’s Health Insurance Plan

New premiums were blamed when families took more than 3000 children out of the Children’s Health Insurance program in Kentucky. The same occurred in Arizona, when families meant to be helped by the state insurance program were unable or unwilling to pay the relatively small premium for coverage. Over 1000 children were removed from the insurance program in Arizona.

The Patient Protection and Affordable Care Act, also known as "health reform", "Obamacare" or any number of names depending on one's political leanings, is one of the most complex pieces of legislative work in decades. The American health care system is currently one of the most regulated industries in the country, for better or worse. All parties seem to agree that some level of reform is due, but there are very basic questions for which are provided no substantial answers. For example, what will it cost each citizen, and what will the government pay directly? Will a revamped American system mirror Canadian, European or an Australian model? Who will be helped and who is left out?

Fear of change in part stems from fear of the unknown. The Children's Health Insurance Program(CHIP) can be looked at as a proving ground for aspects of national health care policy. One study published in the December 2007 issue of Health Services Research isolated aspects of price and enrollment on what was then known as SCHIP.

SCHIP enrollment data was collected in Arizona from July 2001 to December 2005 and in Kentucky from November 2001 to August 2004. New premiums were introduced for certain income groups in Arizona in 2004 and Kentucky in 2003. In Arizona, this meant a fee of $10 per month for one child and $15 per month for two or more children for families with incomes at or below 150 percent of the Federal Poverty Level (FPL). Kentucky families with incomes between 151 and 200 percent of the FPL were hit with a new premium of $20 per month per family.

Advanced statistical models were used to analyze the data. Hazard analysis is a technique separating events into categories of severity and likelihood of occurring. This method let researchers understand why individuals left or remained in the SCHIP programs and if they left, where they went. Time series analysis looks for trends and internal structure in the data and was used to examine changes in worker caseload as premiums changed. The effect in both states indicated that the new premiums caused an increase in program dropout and a drop in the number of children re-enrolled. In short, the new premiums caused the SCHIP program to be less effective at providing health insurance coverage.

Any national health care policy is so complex that a small shift in one variable will affect others in ways impossible to imagine – think of The Law of Unintended Consequences. However, insurance premiums are known to perform at least two functions: reduce public costs and reduce the number of public participants. That is a good starting point as the country renews the national health care debate.